Recently, the Switzerland’s price watchdog (Der Preisüberwacher / Le surveillant des prix) ruled that Booking’s hotel commissions were 'abusively high' and ordered the OTA to lower them by 25% for Swiss hotels.

Some industry executives and revenue managers applauded this ruling and called it “a bold move that was overdue.” Their arguments were that hotels had been “squeezed for years” and that “commissions had not evolved with the market,” etc.

Other hospitality executives and experts called this “a terribly short-sighted government overreach that was bad for Swiss hotels.” They claimed that it was never a good idea for the government to determine commissions in the private sector and that the free market should be able to decide such commercial terms and whether to work or not to work with the OTAs.

The question is: Should the government be regulating OTA commissions hotel pay to the OTAs?

Here is my take:

Since when it's a good thing for the government to determine commissions in the private sector? And why decrease the OTA commissions by 25% and not by 19.5% or 26.8%? This tells you that this was a random number pulled out of regulators’ hats without any accounting or business analysis.

Commissions and markups are charged in many industries: insurance, retail, sales, real estate, etc. Why doesn't the government regulate them all? Ex. Full-service restaurants operate with markups as high as 300%. Why doesn’t the government mandate maximum markups of up to 150% or 200% so that we all enjoy a cheaper meal?

And, how lowering OTA commissions by government edicts will help making the market fairer? This will not decrease the duopoly of Booking and Expedia, on the contrary: lower OTA commissions will lessen the incentive for hotels to invest in their direct distribution. Whoever is asleep at the wheel will go into an even deeper slumber.

In my view, hoteliers should not be celebrating. Hoteliers rejoiced when in 2014 France outlawed the requirement for rate parity in OTA contracts. Ten years later, the OTA market share in France has tripled at the expense of the direct channel.

To compensate for this new regulation, most probably Booking..com will introduce new visibility and performance fees, sponsored listings and other fees for Swiss hoteliers which will be compelled to participate.

It's a free market - hoteliers have to able to decide whether to work or not with the OTAs and at what terms.

Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist

Follow Max